Specialty drugmaker BioSante (Nasdaq: BPAX) announced today the clinical trial endpoints and regulatory pathway for its lead drug candidate and potential female sexual dysfunction (FSD) treatment, LibiGel.

BioSante has experienced many ups and downs over the years. It had a "promising" (ahem) AIDS vaccine and travails with allegedly dishonest former leader Avi Ben-Abraham. The announcement of the start of phase 3 testing for LibiGel is BioSante's latest attempt at developing a drug to treat a potentially large patient population ... but there are a few catches.

LibiGel is a testosterone gel BioSante advanced into phase 3 testing earlier in the month. It's the first of three clinical trials that could support an FDA marketing application in around two years (by my estimate). Even if the FDA allows LibiGel onto the market -- and that's a big if -- there are already a ton of similar generic products on the market. Patients don't have to be Barry Bonds or Roger Clemens to get access to testosterone gels, injections, creams, patches, and pills.

If LibiGel or a rival testosterone patch from Procter & Gamble (NYSE: PG) gains FDA approval, doctors, patients, and health-insurance payers will be smart enough to realize that cheaper generic testosterone gels can be used in its place. Patients and insurers will not be willing to pay for the higher cost of LibiGel instead of generics, and BioSante will be left holding nothing much better than a generic drug on its hands, with accompanying low-margin sales.

A similar fate may await BioSante's recently approved estrogen gel, Elestrin. Like testosterone replacement drugs, Elestrin resembles dozens of estradiol compounds on the market. In the third quarter, BioSante's marketing partner for Elestrin, Bradley Pharmaceuticals (NYSE: BDY), brought in a paltry $100,000 in sales, despite BioSante's frequent touting of the $2.5 billion market for estrogen and testosterone drugs.

Even though LibiGel won't be a generic, it will be competing against plenty of them. The drug could become a low-margin, sub-$100 million treatment, like Novartis' (NYSE: NVS) and Noven Pharmaceuticals' (Nasdaq: NOVN) Vivelle-dot, but NitroMed's (Nasdaq: NTMD) failure in combining two generic drugs and trying to sell them as a branded combination treatment is probably a better indicator of LibiGel's future.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a 98.6 disclosure policy.